Billions approved to finance GM bailout

General Motors won approval Thursday to use up to $33.3 billion to pay for its bankruptcy, after making a few changes to settle technical objections.

The step marks another major milestone in GM’s dash through bankruptcy court, which it and President Obama’s auto industry task force hope to complete with the creation of a new, government-owned GM by the end of the month.

The financing was approved by U.S. Bankruptcy Court Judge Robert Gerber in a matter of minutes after Harvey Miller, GM’s lead bankruptcy attorney, said the company had made some small changes to settle concerns of creditors and local governments.

About $30.1 billion of the money comes from the U.S. Treasury, with the additional money coming from the Canadian government.

The U.S. Treasury also added a clause that Gerber accepted stating it was legal for the government to pay for GM’s bankruptcy using money from the $700 billion financial industry bailout. That had been a legal objection raised unsuccessfully by Chrysler investors opposing its bankruptcy plan.

The $30.1 billion for GM from the federal government comes on top of $19.4 billion lent to GM to keep the automaker from collapse this year. The Treasury will own 60.8% of the new GM when it emerges from bankruptcy protection, a stake Obama administration officials have said they want to sell as quickly as possible.

Gerber also ruled that a group representing GM’s salaried retirees cannot form a formal committee to negotiate with the automaker.

Gerber said that because GM had the right to modify or terminate the retirees’ health care and life insurance benefits before they filed for bankruptcy protection, the retirees can’t challenge the automaker’s ability to do so now.

“While I do understand the importance of this to the retirees, I can’t grant the retirees rights that they don’t have outside of bankruptcy,” Gerber said in issuing his ruling.

As part of its restructuring plan, GM plans to continue to pay health care and life insurance benefits for its 122,000 salaried retirees and their surviving spouses, but those benefits are expected to be reduced and the retirees will be forced to shoulder a larger share of their health care costs.

Retired hourly workers whose benefits are dictated by contracts with unions like the United Auto Workers are not affected.

Also on Thursday, Gerber denied a request from an unofficial committee of people with asbestos-related claims against GM to appoint a “tort czar” that would oversee all future claims against the old GM, not just those related to asbestos.

The asbestos group had previously filed a motion requesting formal committee status, but told the court Thursday that it was no longer pursuing that. The group has one representative on the case’s unsecured creditors committee.

GM also defended the fees it’s paying investment adviser Evercore Partners to guide it through bankruptcy — but said it had negotiated a $1.5 million discount after complaints from federal officials.

The money GM will pay Evercore and turnaround experts Alix Partners was to be debated during the hearing Thursday, but Miller asked for a delay until July 2 for talks with federal officials.

U.S. officials had objected to GM’s proposed payments as “inordinately large,” saying the firms sought $40 million for 30 days of work on top of at least $85 million paid by GM to the companies before bankruptcy. The U.S. bankruptcy trustee and GM’s official creditors committee contend GM needed to provide more information to justify the payments.

In its reply filed Wednesday, GM said Evercore received $24.5 million in the months ahead of GM’s bankruptcy, not $46 million as the U.S. trustee had said. GM’s figure excludes $6 million paid to Evercore for its work in Delphi’s bankruptcy.

The trustee had said Evercore would be paid $17.6 million if GM’s sale closed as planned next month, as well as fees of $400,000 per month. GM said it estimated Evercore would now be due $14.8 million after Evercore had agreed to reduce a fee related to arranging GM’s bankruptcy financing from $2.5 million to $1 million.

GM also defended the hiring of both Evercore and Alix, saying Evercore was responsible for financial talks with the government and creditors while Alix helped oversee day-to-day operations.

Sourced via usatoday.com